Carphone goes mobile with Vodafone

Carphone Warehouse has launched its own mobile phone service under its TalkTalk residential telephony brand, aimed at high spending pre-pay customers who want to save money but are wary of signing up to the 18-month contracts that are becoming standard among the mobile networks.

Talk Mobile offers customers a bundle of calls and texts from £12 a month on contracts as short as nine months. Carphone Warehouse reckons there are 4.5 million pre-pay customers in the UK who regularly spend upwards of £15 a month topping up their talktime. While these customers do not want to sign up to lengthy contracts they will be willing, Carphone Warehouse reckons, to sign a shorter contract to save money.

Carphone Warehouse is using Vodafone's network to run Talk Mobile in a move which City analysts cheered as a thawing of relations between the two companies. Last year Vodafone stopped selling contracts through Carphone stores, signing an exclusive deal with rival Phones4U. It still stocks Vodafone pre-pay phones.

Carphone Warehouse offset much of the potential damage caused by the loss of Vodafone's business by signing an exclusive deal with rival O2 which will make it the only independent retailer to stock this Christmas' must-have gadget, the iPhone. But the loss of Vodafone's lucrative contract business raised concerns among analysts that other networks might break ranks with Carphone Warehouse or force through much better deals, at the expense of the company's profitability.

The news that Vodafone has agreed to let Talk Mobile customers use its network helped send Carphone Warehouse shares to the top of the FTSE 100 leaderboard at lunchtime on Wednesday.

"It is evidence that the relationship between Carphone Warehouse and Vodafone is far from broken," said analyst Mark James at Collins Stewart, "and could heighten speculation that the contract to sell Vodafone subscriptions in the UK could return to Carphone Warehouse from Phones4U."

The deal with Vodafone is a blow to T-Mobile which provides the network services for Carphone Warehouse's existing low-cost mobile phone offering, called Fresh.

Carphone Warehouse has offered the Fresh service for many years but has never put much marketing spend behind it. While it will continue to sell Fresh packages and service existing customers, Carphone Warehouse is expected to focus more on Talk Mobile and its Mobile World cheap international mobile calls services.

Although it carries the TalkTalk branding - not least on the Talk Mobile website - the service is not a prelude to Carphone Warehouse offering a "triple-play" service of home telephony, broadband and mobile all through the one bill, said a spokesman. He said the company has merely spotted a gap in the market, between the current pre-pay and contract offerings, which it intends to exploit.